A Proactive Approach Toward Estate Planning

Under the law of most states, spouses are protected from disinheritance by an “elective share” or “spousal share” in the estate of the deceased, even if the dying spouse fails to provide for the spouse in his or her estate planning. In addition, most states provide that a spouse receives all or a portion of the dying spouse's estate upon death in an intestate estate where the dying spouse leaves no will. These rights are important for spouses so that the surviving spouse can continue to maintain his or her lifestyle. Most couples have common expenses that may not decrease markedly after the death of one partner so that a substantial decrease in income or assets can necessitate a total change in lifestyle or perhaps the inability to survive. It is significant that these protections granted in traditional marriages are not available to same-sex couples, making estate planning essential.

Homestead Protection

Protection is also granted in many states regarding the surviving spouse's rights in the home or homestead property in a traditional marriage. In addition, real estate held between spouses of a traditional marriage is often titled as “tenancy by the entirety property.” This common ownership designation between spouses provides creditor protection against claims against one spouse and guarantees that the property will pass to the surviving spouse upon death. Special attention should be given to estate planning for the marital home in same-sex marriages. Proper planning should ensure that the surviving partner would not be displaced from the home after the first to die. Moreover, proper planning should be done to ensure the survivor has sufficient income or assets to continue to maintain the home.

Preference in Appointment As Executor

In addition, proper planning can ensure that the surviving partner is designated as the executor of the decedent's estate. The law of most states grants the surviving spouse preference in appointment as executor that may not apply in the
same-sex marriage situation. Obtaining the designation as executor will allow the surviving partner continued control over the marital assets. Such appointment will also allow access to information after death and will give him or her control over filing lawsuits on behalf of the estate, if warranted.

Proper planning can compensate for the lack of protection granted to same-sex marital partners under the law upon the death of one partner. During the planning process, all of the assets can be identified and the proper steps can be taken to ensure that the surviving spouse, no matter the order of death, has enough income and assets to continue to maintain his or her lifestyle and, in particular, to maintain and to continue to reside in the marital home. It can also ensure that the survivor has continued control over the marital assets as executor of the decedent's estate. If one spouse is the breadwinner, consideration can be given to life insurance and other common estate planning techniques to provide for the survivor.

Estate Tax Marital Deduction

The Federal Tax law also provides protection to the surviving spouse against estate tax that may prevent the surviving spouse from continuing the lifestyle that both partners enjoyed during life. The tax law currently provides that $3.5 million can pass free from Federal Estate Tax upon a decedent's death. The balance of the total estate is subject to an approximate 45% estate tax. The exception to this rule is that any assets passing directly to a spouse (or in a qualifying trust for a spouse) pass free from Federal Estate tax. This marital deduction protects the surviving spouse's lifestyle and provides that the estate tax is typically only paid upon the second death.

Again, it is important to note that same-sex couples are not granted the benefit of the marital deduction under the Federal tax law. Same-sex couples with large estates must be aware of the sizable estate tax that will occur at the first death and plan accordingly.

Planning Ahead Is the Key

Estate planning is imperative for same-sex couples that typically will not be granted any protections under state or Federal law. The level of complexity will vary with every estate depending on the nature of the family involved, on the nature of the assets and on the size of the estate. Estate planning should generally be done with the assistance of a qualified professional to ensure that each partner can make health care decisions during life and can otherwise deal with incapacity. This planning will also ensure that the desired beneficiaries will receive the estate of a decedent without litigation and that the estate tax will be minimized. Each partner should insist on proper planning so that the surviving partner is given the protections that are not granted to same-sex partners under state or federal law.

Linda L. Snelling is a Fort Lauderdale, FL-based partner in the estate planning practice group of Hinshaw & Culbertson LLP. She can be reached at [email protected].

Part One of this article discussed issues such as Living Wills, Powers of Attorney and guardianship. The conclusion herein addresses securing rights for the surviving spouse in a same-sex marriage.

Rights for the Surviving Spouse

Spousal Elective Share and Intestacy Rights

Under the law of most states, spouses are protected from disinheritance by an “elective share” or “spousal share” in the estate of the deceased, even if the dying spouse fails to provide for the spouse in his or her estate planning. In addition, most states provide that a spouse receives all or a portion of the dying spouse's estate upon death in an intestate estate where the dying spouse leaves no will. These rights are important for spouses so that the surviving spouse can continue to maintain his or her lifestyle. Most couples have common expenses that may not decrease markedly after the death of one partner so that a substantial decrease in income or assets can necessitate a total change in lifestyle or perhaps the inability to survive. It is significant that these protections granted in traditional marriages are not available to same-sex couples, making estate planning essential.

Homestead Protection

Protection is also granted in many states regarding the surviving spouse's rights in the home or homestead property in a traditional marriage. In addition, real estate held between spouses of a traditional marriage is often titled as “tenancy by the entirety property.” This common ownership designation between spouses provides creditor protection against claims against one spouse and guarantees that the property will pass to the surviving spouse upon death. Special attention should be given to estate planning for the marital home in same-sex marriages. Proper planning should ensure that the surviving partner would not be displaced from the home after the first to die. Moreover, proper planning should be done to ensure the survivor has sufficient income or assets to continue to maintain the home.

Preference in Appointment As Executor

In addition, proper planning can ensure that the surviving partner is designated as the executor of the decedent's estate. The law of most states grants the surviving spouse preference in appointment as executor that may not apply in the
same-sex marriage situation. Obtaining the designation as executor will allow the surviving partner continued control over the marital assets. Such appointment will also allow access to information after death and will give him or her control over filing lawsuits on behalf of the estate, if warranted.

Proper planning can compensate for the lack of protection granted to same-sex marital partners under the law upon the death of one partner. During the planning process, all of the assets can be identified and the proper steps can be taken to ensure that the surviving spouse, no matter the order of death, has enough income and assets to continue to maintain his or her lifestyle and, in particular, to maintain and to continue to reside in the marital home. It can also ensure that the survivor has continued control over the marital assets as executor of the decedent's estate. If one spouse is the breadwinner, consideration can be given to life insurance and other common estate planning techniques to provide for the survivor.

Estate Tax Marital Deduction

The Federal Tax law also provides protection to the surviving spouse against estate tax that may prevent the surviving spouse from continuing the lifestyle that both partners enjoyed during life. The tax law currently provides that $3.5 million can pass free from Federal Estate Tax upon a decedent's death. The balance of the total estate is subject to an approximate 45% estate tax. The exception to this rule is that any assets passing directly to a spouse (or in a qualifying trust for a spouse) pass free from Federal Estate tax. This marital deduction protects the surviving spouse's lifestyle and provides that the estate tax is typically only paid upon the second death.

Again, it is important to note that same-sex couples are not granted the benefit of the marital deduction under the Federal tax law. Same-sex couples with large estates must be aware of the sizable estate tax that will occur at the first death and plan accordingly.

Planning Ahead Is the Key

Estate planning is imperative for same-sex couples that typically will not be granted any protections under state or Federal law. The level of complexity will vary with every estate depending on the nature of the family involved, on the nature of the assets and on the size of the estate. Estate planning should generally be done with the assistance of a qualified professional to ensure that each partner can make health care decisions during life and can otherwise deal with incapacity. This planning will also ensure that the desired beneficiaries will receive the estate of a decedent without litigation and that the estate tax will be minimized. Each partner should insist on proper planning so that the surviving partner is given the protections that are not granted to same-sex partners under state or federal law.

Linda L. Snelling is a Fort Lauderdale, FL-based partner in the estate planning practice group of Hinshaw & Culbertson LLP. She can be reached at [email protected].